IR35 for hirers: your status decision and what it means

It's Wednesday. The PLC on line 3 has been crashing twice a week since the summer, and every crash costs you output you can put a price on. You've found a controls engineer who knows that platform inside out. They work through their own limited company. The agency's happy to place them.

Then the email lands. Before the engineer can start, the agency needs your status determination statement. Inside or outside IR35. With reasons.

Your HR team says "just put inside, it's safer." Procurement says the engineer won't come if you do. Meanwhile line 3 crashes again.

Here's what goes wrong. The person who knows the job is the maintenance manager. The person who fills in the form often isn't.

Do you even have to decide?

The off-payroll rules apply to all public sector clients and to medium and large private sector ones. A private business counts as medium or large if it meets two or more of these: turnover over £10.2 million*, a balance sheet total over £5.1 million*, or more than 50 employees* (HMRC, off-payroll working for clients).

Those turnover and balance sheet figures are going up. For financial years beginning on or after 6 April 2025, the thresholds become turnover over £15 million* and a balance sheet over £7.5 million*. The 50-employee limit stays. Because of the way the years roll through, HMRC says the earliest tax year this can change things for a client is 2027/28* (ESM10006A). Ask your finance team which side of the line you're on now, and which side you'll be on then.

If you're small, the engineer's own company makes the call. You still have to confirm your size if the agency or the engineer asks.

What you have to do if you're in

You decide the status of each worker who comes through their own company, even if they come through an agency. You put it in a status determination statement. HMRC says it must "be passed to the worker and the person or organisation you contract with" and "give your conclusion and the reasons for reaching it."

Until you do that, the tax lands on you. You're responsible for deducting income tax and National Insurance until you tell the worker and the agency your decision and the reasons. If you contract with the engineer's company directly, with no agency, "you will always be the deemed employer."

You also need to keep records of each decision, have a way to handle disagreements, and re-check when the job changes. If the engineer or the deemed employer disagrees, you have 45 days* to respond. Miss that and their income tax and National Insurance become your responsibility.

Reasonable care is the test

You must take reasonable care when you decide. HMRC's manual lists what that looks like. One item on the list is "having someone with a good understanding of the work to be undertaken involved in the determination process" (ESM10014). That's you, or your engineering lead.

The same page lists what fails. Deciding that every worker through an intermediary is caught "without giving any consideration to the specific facts" is one of them. So is putting wrong answers into HMRC's CEST tool. If you fail reasonable care, the tax and National Insurance stay with you, even if someone else has already made deductions.

So "just put inside" gives you no cover. HMRC lists that blanket answer as a failure of care.

CEST helps. HMRC says it "will stand by all results given by the tool, as long as the information you give remains accurate and is in accordance with our guidance" (CEST). The tool asks who decides what work is done, and when, where and how. Those are questions about the shop floor, so answer them from the shop floor.

What the shop floor tells HMRC

Status turns on how the work is really done. A few of HMRC's tests map straight onto maintenance work.

Start with control. Skilled people often aren't told how to do the job. HMRC's manual gives "a consulting engineer" as an example of work where control over how it's done isn't appropriate (ESM0528). Lack of hands-on supervision doesn't settle it either way. What matters is the right to control, and the framework the engineer works within.

Then substitution. A right to send someone else counts only if it's genuine. HMRC says that where the worker can only suggest someone, "there is of course no right to send a substitute" (ESM0534).

Equipment comes next. A toolbag doesn't count for much. HMRC says little weight goes on "the provision of small tools where it is customary for them to be provided" (ESM0540). A contractor's own laptop with licensed PLC software is a different question.

Last, whether they're part and parcel of your organisation. HMRC's example of someone who isn't part of the organisation is "a mechanic, with a contract to maintain a firm's office equipment, who was called in by the firm from a base elsewhere when repairs were needed" (ESM0545).

Put two jobs side by side. An engineer on your night rota, taking jobs from your shift manager, working your permits, using your tools, paid by the hour, looks a lot like an employee. A controls specialist quoting a fixed price to fix line 3's PLC, using their own software, choosing their own hours, and liable to put their own mistakes right, may not. Same site. Different answers.

That's why each engagement needs its own look. The rules apply "on a contract-by-contract basis" (HMRC).

Our view

Get the decision right, and get it done before the engineer is needed. A blanket "inside" costs you good contractors, who go to the site down the road. Then the PLC keeps crashing and you're paying for lost output while you look for someone else. A careless "outside" leaves the tax bill on your desk.

Neither is a good trade. Twenty minutes with the person who'll manage the job, CEST answered honestly, and the reasons written down, is what reasonable care looks like in practice.

If you're still working out how agency, umbrella and limited company engineers differ for you, start with what changes for you as the hirer. If the role is really a long-term gap on the team, read agency engineer or a new hire first. And if a breakdown can't wait for paperwork, an engineer employed by the agency or an umbrella is outside these rules, because the rules only cover workers who aren't employed by another party in the chain. While you wait, make sure someone has backups of the PLC program.

This is our reading of HMRC's guidance. It isn't tax advice, so take advice on your own case.

What to do on Monday

1. Ask finance whether you're small, medium or large for the off-payroll rules this tax year, and what the new thresholds mean for 2027/28*.
2. List every engineer working through their own company, and check each has a current statement with reasons.
3. Put the maintenance manager in the room for every status decision on an engineering role.
4. Set up a named inbox for disagreements, with the 45-day* clock written on the process.

* The size thresholds, the 45-day response time and the 2027/28 date are correct as of 31 October 2026. Check HMRC's off-payroll working for clients and ESM10006A for the latest.